SCHEDULE: Nantahala Capital Boosts Femasys Stake

Nantahala Capital Partners Limited Partnership and affiliated entities have acquired a significant stake in Femasys Inc., securing board representation and certain governance rights.

Summary

• Nantahala Capital Partners Limited Partnership, along with Nantahala Capital Management, LLC, Wilmot B. Harkey, and Daniel Mack, have jointly filed a Schedule 13D indicating beneficial ownership of 803,038 shares of Femasys Inc. common stock, representing 9.99% of the outstanding shares.
• This stake was acquired through a Stock Purchase Agreement on August 7, 2026, involving an investment of $11,999,705.22 for shares and various warrants.
• The acquisition includes pre-funded warrants, common warrants, and milestone warrants, with the latter contingent on Femasys achieving specific revenue and stock price targets.
• As part of the agreement, Nantahala has secured board representation rights, including a board seat and committee membership, and information rights, subject to certain ownership thresholds and conditions.
• The reporting persons did not beneficially own any shares prior to this transaction.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a moderately positive development, indicating significant investment and a strategic partnership, though the full impact depends on future performance milestones.

Positives

• Significant capital infusion into Femasys Inc. totaling $11,999,705.22.
• Nantahala Capital, a substantial investor, has taken a significant stake (9.99%) in the company.
• Nantahala has secured board representation and governance rights, suggesting a strategic partnership and confidence in Femasys's future.
• The acquisition includes various warrants, providing potential for further upside for Nantahala and future capital for Femasys upon exercise.
• The company has agreed to use commercially reasonable efforts to facilitate the resignation of two current board members to accommodate Nantahala's designees.

Negatives

• The milestone warrants are not presently exercisable and depend on Femasys achieving specific performance milestones (revenue of at least $1,500,000 in a fiscal quarter and a volume-weighted average stock price 130% of the exercise price for 20 of 30 consecutive trading days).
• The agreement includes a beneficial ownership limitation, restricting the exercise of warrants if it would result in ownership exceeding 9.99% of the Issuer's outstanding common stock, though this can be increased with notice.
• Certain actions by Femasys require Nantahala's prior written consent, potentially impacting the company's operational flexibility.

Risks

• The success of the milestone warrants is contingent on Femasys achieving specific financial and stock performance targets, which are not guaranteed.
• Potential for governance friction or strategic disagreements between Nantahala and the existing Femasys management/board.
• The beneficial ownership limitation could restrict the full exercise of warrants and thus limit the potential upside for Nantahala.
• Future strategic decisions of Femasys may be subject to Nantahala's prior written consent, potentially slowing down or altering planned actions.

Future Outlook

The future outlook for Femasys Inc. is significantly influenced by its ability to meet the performance milestones required for the exercise of the milestone warrants. Nantahala Capital's involvement and board representation suggest a focus on driving value and achieving these targets. The company's ability to manage its operations under Nantahala's consent rights and to potentially increase Nantahala's ownership beyond 9.99% will also shape its future.

Management Comments

• The Reporting Persons intend to review their investment in the Issuer on a continuing basis.
• No Reporting Person has any present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon or in connection with completion of, or following, any of the actions discussed herein.

Industry Context

StockSavvy.ai notes that this filing represents a significant shift in Femasys Inc.'s ownership structure and governance. The acquisition of a substantial stake and board seats by an investment firm like Nantahala Capital is common in situations where investors seek to influence strategy and unlock shareholder value, particularly in companies with growth potential or those undergoing strategic transitions. This move aligns with broader trends of active institutional ownership in the biotechnology or medical device sectors where Femasys operates.

Comparison to Industry Standards

• The acquisition of a 9.99% stake and board representation is a common strategy for activist or strategic investors in the biotechnology and medical device sectors, aiming to influence corporate strategy and governance.
• The structure of the investment, including a mix of common stock, pre-funded warrants, and performance-based milestone warrants, is a sophisticated approach often seen in venture capital and private equity deals within the life sciences industry.
• The inclusion of specific consent rights for Nantahala on key corporate actions (e.g., CEO termination, significant debt incurrence) is a standard protective measure for significant investors in private or early-stage public companies, though less common for passive institutional investors.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for increased shareholder value if Nantahala's involvement leads to improved performance and strategic execution. Dilution risk exists if warrants are exercised and new shares are issued.
• Management/Board: Increased oversight and potential for changes in leadership or strategic direction due to Nantahala's board representation and consent rights.
• Creditors: Potential impact from Nantahala's consent right on incurring indebtedness over $2,500,000, which could affect the company's leverage and financial risk profile.

Next Steps

• Femasys Inc. is expected to facilitate the voluntary resignation of two current board members within sixty days after the Purchase.
• Nantahala Capital will have the right to appoint designees to the Femasys board and its committees.
• Nantahala will receive certain financial information and have quarterly meetings with Femasys management.
• The Issuer must use commercially reasonable efforts to file a shelf resale registration statement within 30 days of the Purchase and have it declared effective by the SEC within 60 days.
• The Reporting Persons will continue to review their investment in Femasys Inc.

Key Dates

Recommendation

The filing indicates a significant investment and strategic partnership, which is positive. However, the reliance on future performance milestones for full warrant value and the potential for governance constraints warrant a cautious 'hold' until Femasys demonstrates progress towards these milestones and successful integration of Nantahala's strategic input.

Keywords

Schedule 13D, Femasys Inc., Nantahala Capital, Stock Purchase Agreement, Warrants, Board Representation, Beneficial Ownership